This Trade Could Double Your Money by May

Option Trade of the Day: SPDR Gold Shares (NYSE: GLD)

The downward momentum from Wednesday and Thursday carried over in to Friday morning, but the selling pressure was short lived as the market hit its low of the day in the first half hour. Stocks rallied from that low and the S&P ended up hitting the high of the day in the final half hour of trading.

[hana-code-insert name=’adsense-article’ /]The performances of the three main indices varied greatly on Friday with the Nasdaq gaining over 1%, the S&P gained 0.51% and the Dow actually lost 0.29%.

McDonalds, Caterpillar and Boeing really weighed on the Dow.

With the majority of stocks experiencing a turnaround from Friday morning to Friday afternoon, my scans produced 32 bullish signals and not a single bearish signal.

Of the 32 bullish signals, I liked the look of the SPDR Gold Shares (NYSE: GLD) chart the best as it has been in a solid uptrend for just over a year.

I chose to show the weekly chart, but on the daily chart we saw the GLD drop below its 50-day on Thursday and then bounced back above it on Friday.

On the weekly chart we see a clear uptrend in GLD shares that goes back to late ’16 with a channel guiding the price higher. The price flirted with the lower rail last week before rallying on Friday. The sentiment toward GLD moved to a more bullish stance on Friday, but earlier last week the sentiment reading was in the lower 10% of readings for the past year. Previous instances of low sentiment readings have been pretty consistent indications of a move higher.

Buy to open the April18 124 strike calls on GLD at $3.00 or better. These options expire on April 20. Given the current price of the options and the current price of the ETF, we only need a 3.7% move for these options to double in value. The GLD will have to break above the recent high of $129.51, but I believe it can do that. I would use the 50-day moving average as a stop-loss point, but I would only shut the trade down if the price closes below the moving average, not an intraday move.

— Rick Pendergraft

OPTIONS DISCLAIMER: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation,

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Rick Pendergraft, Trades Of The Day

Rick Pendergraft has been studying, trading, analyzing and writing about the investment markets for over 30 years. He has worked for some of the largest financial publishers in the world and he has been quoted in the Wall Street Journal, USA Today, the New York Times and the Washington Post. In addition, he has been interviewed on Bloomberg, CNBC and Fox Business News. Rick's analysis process includes fundamental, sentiment and technical analysis.